venture capitalists no-code

Venture Capitalists and the No-Code Startup

August 16, 2022

Building a startup is exciting but is also expensive. If you have a big idea, you will need some financial backing to get your business in a good start. And that’s where venture capitalists come into the story. 

Venture capital (VC) is defined by Investopedia as a type of financing that investors provide to startups and small businesses that have good valuation and growth potential. Getting a venture capital can come in at any point of the business cycle but most especially when scaling up. Venture capital funds manage pooled investments in high-growth opportunities in startups and other early-stage firms and are typically only open to accredited investors. Think of Shark Tank but without the cameras rolling and the rehearsed pitch spiels. 

Successful businesses have relied on venture capital at one point, such as Uber, WhatsApp, Zoom, and so much more. According to a survey, funding is the number one reason 90% of startups die. This can be a string of mistakes that entrepreneurs and founders can be avoided and you can read it HERE. Growing a business needs a lot of capital to sustain its growth to achieve that next level of profitability. Aside from bootstrapping, venture capital is a startup’s opportunity.

With no-code’s growth in the industry, it opens the potential for more agencies and software products in the market up for funding. As professional and citizen developers grow, so do the ideas that will come into the market. Eventually, as an idea grows there will be a need for funding as well. How is this affecting the venture capital industry and will no-code products or services have a chance in securing that funding? We will take a look at how:

But first, how does a Venture Capital Work?

Just click on Google and you will see a number of articles on how to apply for VC funding for different companies. Here are some basic steps to getting started.

Business Plan

At this stage, you will introduce your business and why it will yield profit for them? This is the presentation of the business idea that includes target markets, expected profit range, forecasted sales, business objectives, and timeline

Initial Meeting

This is the crucial point where you get to pitch your business to the investors. Not only will they look at your data, but they will also get a chance to meet you and see whether you can navigate the business to a higher scale. 

Due diligence 

The due diligence phase varies depending upon the nature of the business proposal. This process involves solving queries related to customer references, and product and business strategy evaluations. 

Term Sheet offer

Yay! This is where the champagne starts popping and where the hard work begins.  You will now receive the funding for your project where the terms will be discussed. 

What are the Kinds of Funding?

When you have the Term Sheet already, you will be able to get investment money to scale your business. The funding will depend on what stage of the business you are in already. The three basic types of venture capital are early-stage financing, expansion financing and acquisition/buyout financing. Here are the types of financing based on what phase of the business cycle is

Seed money

This is the initial, low-level financing that a business can use for product development and market research. According to Investopedia, startups can expect an amount between $10,000 up to $2 million for the startup.

Series A-E Funding

After the “seed” has grown and poses to be profitable, the series funding gets bigger while the forecasted sales expectations grow higher as well. Some businesses opt to go with financial institutions eventually after Series C so very few startups reach Series D & E. 

No-Code Products for Venture Capitalists

The future is bright for low-code and no-code startups that have attracted venture capitalists. Thunkable which was founded in 2015 raised a Series B funding of $30M which will be used to improve its company capabilities, develop a creator communities marketplace and encourage the upskilling of its team members. No-code giant Bubble raised a Series A funding for $100M in 2021. Bubble had a long history of being a bootstrapped company for 7 years. Co-founders Emmanuel Straschnov and Josh Haas just had the seed money of  $6.5 million seed round in June 2019 and have shown tremendous growth. We also want to point out Airtable’s impressive Series F funding worth $170M. 

In general, investment in no-code vendors has raised $2.3B during the first three quarters of 2021, more than doubling the total investments they received in 2020 ($1.1B) This is why VCs have been optimistic about approving investments for these. VCs have targeted no-code editors before but are now also looking at startups using them.  VCs have become interested in how no-code enables quick idea validation, fast iteration, and launch at a lower cost. Since the early stages of a start-up come with failures, the resources of a VC funding do not burn at the same speed if the capacity for action and iteration is 10 times higher. 

Despite the recent years’ positive feedback of no-code funding, some investors are starting to rethink its viability. According to a TechCrunch article, investors feel that the pre-coded elements are not going to cover every edge case which is what customers really need. They also said that the no-code category is starting to get a little bit saturated.

No-Code Products as a Good Investment 

No-code has been dubbed the future. Even at its infancy, it has proven to be a viable tech trend that can be utilized even in Web3. As we speak, we can apply no-code in hyperautomation for business, artificial intelligence business applications, and even in the metaverse. As industry experts see, no-code will only grow from here. By lifting the barriers of software development, no-code can let anyone with an idea build something faster and easier. We discussed the potential of no-code for non-profits HERE, but we know that it could do more.  We will see that VCs will also have a shift that can work well for no-code vendors.  

If you have an idea, let’s talk it out with our team of experts and managers. We are certified Adalo experts and have a seasoned team to bring out your business. Click HERE to schedule a call. 
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